High price concerns pressure crude

CBS.MarketWatch.com

NEW YORK (CBS.MW) -- Oil futures closed lower Thursday after the U.S. government signaled concern over high oil prices and comments from Saudi Arabia and Norway failed to mention support for an extension of OPEC output cuts.

Oil prices fell after U.S. energy secretary Bill Richardson said the Clinton Administration was concerned about high home heating oil prices, a daily report from GNI Research said. Richardson plans to hold a summit meeting next month with heating oil refiners to discuss the reasons for the price hike and solutions to help consumers meet their heating needs.

On the New York Mercantile Exchange, March crude fell 52 cents to $27.32 a barrel. February heating oil slipped 0.96 cents to 91.17 cents a gallon. February unleaded gasoline fell 0.84 cent to 74.15 cents a gallon. See latest commodity prices.

"The politics of oil is also heating up, with presidential candidate, Governor George Bush calling on President Clinton to urge OPEC to produce more crude oil to lower world prices," the GNI report said.

However, Richardson has said he won't propose a sale of oil from the strategic petroleum reserve to help reduce prices at this time.

Meanwhile, oil ministers from Saudi Arabia and Norway indicated that the world oil glut has ended, according to Saudi's official SPA news agency Wednesday. Although the ministers did pledge to keep output limits in place through March, they failed to mention any support for an extension of limits past their March expiration. That sparked market fears that OPEC won't extend its production curbs as anticipated.

Additionally, petroleum futures were pressured by reports that Luis Tellez, Mexico's energy secretary said his country will keep its limits on oil production through March, but that producers will discuss supply levels when the output curbs end that month.

However, an unexpected decline in last week's crude oil supplies and a significant drop in U.S. distillate supplies limited the losses in the petroleum market Thursday.

This week, the American Petroleum Institute said supplies of distillates, which include heating oil, plunged 8.29 million barrels to 114.7 million for the week ended Jan. 21. The data compares to market expectations for a drop between 6 million to 7 million barrels, according to a Bridge News survey.

The Department of Energy, which released its weekly report four hours late on Wednesday due to snow storms in Washington, said supplies of distillates slipped 8.2 million barrels last week.

The API also reported a 3 million barrel decline in crude oil inventories, defying market expectations for a rise between 2 million and 3 million barrels. The Energy Department's measure of stocks fell 2.4 million barrels.

Gasoline supplies, according to the API, saw an increase of 2.16 million barrels, a bit higher than expectations for a no more than 2-million-barrel rise. The Energy Department reported a 2.6 million barrel rise.

Natural gas supplies fall as expected

Late Thursday, the American Gas Association report, which was delayed by 24 hours due to the winter storm in Washington D.C, revealed a 195 billion cubic foot decline in last week's U.S. natural gas supplies.

The data fell on the high-end of expectations for a 175 billion to 195 billion cubic foot decline, according to a Bridge News survey. Total inventories, as of last week, stand at 2,017 billion cubic feet.

On its last day of trading as a front month contract, February natural gas closed up 8.7 cents to $2.61 per million British thermal units, ahead of the news. March natural gas , which is now the lead month contract, rose 4.9 cents to $2.54.

Warmer-than-usual weather is forecasted to return to the northeastern U.S. next week.

Metals update

Gold futures closed nearly unchanged for a third day, as Tuesday's U.K. gold auction was "largely seen as neutral for the market, and failed to shed much light on which way gold could be heading to next," said Dave Meger, senior metals analyst for Alaron.com.

February gold rose 60 cents to $287.10 an ounce on the Commodities Exchange division of the New York Mercantile Exchange. March silver added 13.2 cents to $5.415 an ounce, boosted by purchases from European trade houses, according to Bridge News.

Comex gold stocks, as of late Wednesday, were flat at 1,388,197 ounces. Silver stocks were also unchanged at 73,358,828 ounces.

April platinum rose $13.10 to $445.60 an ounce while March palladium gained $11 to $483 an ounce as traders await Russian deliveries scheduled to begin at the end of February, Bridge News reported.

March copper rose 0.3 cent to 84.45 cents. The London Metals Exchange warehouse said stocks were up 5,050 metric tons to 812,500 metric tons as of early Thursday. Comex stocks were up 221 short tons to 95,425 short tons.

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